BRENTWOOD, Tenn.--(BUSINESS WIRE)--Quorum Health Corporation (NYSE: QHC) (the “Company”) today announced its financial and operating results for the three months ended March 31, 2018.
First Quarter 2018 Financial and Operating Results
The Company’s financial and operating results for the three months ended March 31, 2018 reflect the following:
- Net operating revenues decreased $40.8 million to $486.8 million, compared to $527.6 million for the same period in 2017.
- Net income (loss) was $(98.5) million compared to $(27.2) million for the same period in 2017.
- Net loss attributable to Quorum Health Corporation was $(99.0) million, or $(3.48) per share, compared to $(27.6) million, or $(0.99) per share, for the same period in 2017.
- On a same-facility basis, as defined in footnote (i), admissions increased 0.4%, adjusted admissions increased 1.1% and net operating revenues per adjusted admission increased 3.4% compared to the same period in 2017.
- Adjusted EBITDA was $18.4 million compared to $26.1 million for the same period in 2017.
- Adjusted EBITDA, Adjusted for Divestitures, which is further adjusted to exclude the effect of EBITDA of hospitals either sold or closed as of March 31, 2018, was $26.8 million compared to $30.9 for the same period in 2017.
The following items impacted the Company’s financial and operating results for the three months ended March 31, 2018:
- The $40.8 million decline in the net operating revenues for the quarter was primarily attributable to a $60.6 million decrease from the ten hospitals sold or closed since the spin-off from Community Health Systems, Inc. (“CHS”) in April 2016 (collectively, “the divested hospitals”), partially offset by a $7.9 million increase related to revenues from the California Hospital Quality Assurance Fee (“HQAF”) program, of which there were no comparable revenues in the same 2017 period. Excluding the divested hospitals of $60.6 million and the California HQAF revenues of $7.9 million, net operating revenues increased $11.9 million in the three months ended March 31, 2018 compared to the same period in 2017, primarily due to an increase in both admission volume and acuity.
- The net loss for the three months ended March 31, 2018 was impacted by $39.8 million of impairment of long-lived assets, $13.7 million of costs related to the closure of one hospital and $7.8 million of net losses on the sale of two hospitals.
- The operating results from the divested hospitals negatively impacted EBITDA by $8.4 million and $4.8 million for the three months ended March 31, 2018 and 2017, respectively. For the three months ended March 31, 2018, approximately $5 million of the $8.4 million in losses related to our closure of one hospital, as the Company saw a significant deterioration in losses upon announcing the closure in early January.
Divestiture Program
The Company also provided an update on its divestiture program. To date, the Company has received $84.8 million in total net proceeds from divestitures, which includes $8.0 million of proceeds held in escrow, and used $74.9 million to the pay down the Company’s term loan under its Senior Credit Facility. The Company remains focused on completing an additional $165 million to $215 million in proceeds from divestitures by the end of 2019. As of May 9, 2018, the Company has signed letters of intent (“LOIs”) to divest seven facilities. Although these LOIs are not definitive and no assurance can be provided as to the likelihood or timing of these turning into completed transactions, these signed LOIs represent potential net cash proceeds to the Company in excess of $100 million.
Margin Improvement Program
Although the Company has seen same-facility volume improvements for the past four quarters, primarily as a result of physician recruiting efforts in specialty areas, certain markets have experienced cost growth exceeding revenue growth, which has compressed Company margins. As a result, the Company is undertaking a comprehensive margin improvement program, which focuses in several key areas including a strategic review of underperforming service lines, supply cost management, staff productivity and volume enhancement. At the request of the Company’s board of directors, management is in the process of engaging a firm to support the development and implementation of the Company’s margin improvement plan and other plans to improve the Company’s operational and financial performance. The Company is in negotiations with Alvarez & Marsal to undertake these assignments, and expects that work will begin shortly.
Update on TSA Transition
On March 19, 2018, the Company received notice from CHS that CHS was seeking to terminate, effective September 30, 2018, the Shared Services Transition Services Agreement (the “SSC TSA”) and the Computer and Data Processing Transition Services Agreement (the “IT TSA”). The notice from CHS also provided an indication of CHS’s preference to terminate the remaining TSAs as well. The effectiveness of the September 30, 2018 deadline for terminating the IT TSA will be litigated during the course of the arbitration. The Company continues to believe that termination of all the TSAs is in its best long-term interests, and is working to ensure that the transitions are undertaken in a manner that minimizes the associated risks inherent in such a termination.
Financial Outlook
The Company has updated its financial outlook for the year ending December 31, 2018 as discussed below. These projections are based on the Company’s historical operating performance, current economic, demographic and regulatory trends and other assumptions that the Company believes are reasonable at this time. The 2018 guidance should be considered in conjunction with the assumptions included herein. Due to the impact of operating results at divested and closed hospitals, as well as the potential impact from divestitures that could occur prior to the end of the fiscal year 2018, the Company is no longer providing guidance on Adjusted EBITDA and is presenting Adjusted EBITDA, Adjusted for Divestitures to only include hospitals divested and closed through March 31, 2018. See “Forward-Looking Statements” below for a list of factors that could affect the future results of the Company or the healthcare industry generally.
The Company expects net operating revenues for the year ending December 31, 2018 to range from $1.925 billion to $1.975 billion. The Company expects Adjusted EBITDA, Adjusted for Divestitures to range from $145 million to $165 million. The guidance for Adjusted EBITDA, Adjusted for Divestitures is adjusted: (i) to include approximately $23 million of California HQAF revenues, net of provider taxes, (ii) to give effect to the reduction of approximately $3 million in electronic health records incentives earned in 2018 compared to 2017, (iii) to include approximately $10 million to $12 million of non-cash stock-based compensation and other non-cash benefits expense and approximately $20 million to $25 million of non-cash insurance expense, (iv) to provide no estimate for the effects of any changes to the Affordable Care Act, its interpretation or its implementation, and (v) to exclude the negative (positive) EBITDA of hospitals divested or closed through March 31, 2018, but includes the negative (positive) EBITDA of potential divestitures that may occur during the remainder of 2018. The Company will update its guidance for any divestitures that are completed during the remainder of 2018.
A reconciliation of the Company’s projected 2018 Adjusted EBITDA, Adjusted for Divestitures, a forward-looking non-GAAP financial measure, to net income (loss), the most directly comparable U.S. GAAP financial measure, is omitted from this press release because the Company is unable to provide such reconciliation without unreasonable effort. This inability results from the inherent difficulty in forecasting generally and in quantifying certain projected amounts that are necessary for such reconciliation. In particular, sufficient information is not available to calculate certain items required for such reconciliation without unreasonable effort, including interest expense, provision for (benefit from) income taxes and other adjustments that would be necessary to prepare a forward-looking statement of net income (loss) in accordance with U.S. GAAP. For the same reasons, the Company is unable to address the probable significance of the unavailable information.
About Quorum Health Corporation
The principal business of Quorum Health Corporation is to provide hospital and outpatient healthcare services in its markets across the United States. As of March 31, 2018, the Company owned or leased 28 hospitals in rural and mid-sized markets located across 14 states and licensed for 2,675 beds. Through Quorum Health Resources LLC, a wholly-owned subsidiary, the Company provides hospital management advisory and healthcare consulting services to non-affiliated hospitals across the country. Over 95% of the Company’s net operating revenues are attributable to its hospital operations business.
The Company’s headquarters are located in Brentwood, Tennessee, a suburb south of Nashville. Shares in Quorum Health Corporation are traded on the NYSE under the symbol “QHC.” More information about the Company can be found on its website at www.quorumhealth.com.
Quorum Health Corporation will hold a conference call on Thursday, May 10, 2018, at 10:00 a.m. Central time, 11:00 a.m. Eastern, to review operating and financial results for the three months ended March 31, 2018. Investors will have the opportunity to listen to a live internet broadcast of the conference call by clicking on the Investor Relations link of the Company’s website at www.quorumhealth.com. To listen to the live call, please go to the website at least 15 minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call and will continue to be available for approximately 30 days. Copies of this press release and the Company’s Current Report on Form 8-K (including this press release) are available on the Company’s website at www.quorumhealth.com.
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QUORUM HEALTH CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (In Thousands, Except Earnings per Share and Shares) |
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| Three Months Ended March 31, | ||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||
| % of | % of | |||||||||||||||||
| $ Amount | Revenues | $ Amount | Revenues | |||||||||||||||
| Operating revenues (a) | $ | 587,945 | ||||||||||||||||
| Provision for bad debts (b) | 60,305 | |||||||||||||||||
| Net operating revenues | $ | 486,820 | 100.0 | % | 527,640 | 100.0 | % | |||||||||||
| Operating costs and expenses: | ||||||||||||||||||
| Salaries and benefits | 247,000 | 50.7 | % | 264,602 | 50.1 | % | ||||||||||||
| Supplies | 58,886 | 12.1 | % | 63,822 | 12.1 | % | ||||||||||||
| Other operating expenses (a) | 152,738 | 31.3 | % | 163,424 | 31.1 | % | ||||||||||||
| Depreciation and amortization | 18,261 | 3.8 | % | 22,120 | 4.2 | % | ||||||||||||
| Rent | 12,532 | 2.6 | % | 12,102 | 2.3 | % | ||||||||||||
| Electronic health records incentives earned | (141 | ) | 0.0 | % | (2,452 | ) | (0.5 | )% | ||||||||||
| Legal, professional and settlement costs | 3,413 | 0.7 | % | 535 | 0.1 | % | ||||||||||||
| Impairment of long-lived assets and goodwill | 39,760 | 8.2 | % | 3,300 | 0.6 | % | ||||||||||||
| Loss (gain) on sale of hospitals, net | 7,815 | 1.6 | % | (870 | ) | (0.2 | )% | |||||||||||
| Loss on closure of hospitals, net | 13,746 | 2.8 | % | — | — | % | ||||||||||||
| Transaction costs related to the Spin-off | — | — | % | 31 | 0.0 | % | ||||||||||||
| Total operating costs and expenses | 554,010 | 113.8 | % | 526,614 | 99.8 | % | ||||||||||||
| Income (loss) from operations | (67,190 | ) | (13.8 | )% | 1,026 | 0.2 | % | |||||||||||
| Interest expense, net | 30,931 | 6.4 | % | 27,530 | 5.2 | % | ||||||||||||
| Income (loss) before income taxes | (98,121 | ) | (20.2 | )% | (26,504 | ) | (5.0 | )% | ||||||||||
| Provision for (benefit from) income taxes | 366 | — | % | 701 | 0.2 | % | ||||||||||||
| Net income (loss) (c) | (98,487 | ) | (20.2 | )% | (27,205 | ) | (5.2 | )% | ||||||||||
| Less: Net income (loss) attributable to noncontrolling interests | 481 | 0.1 | % | 356 | 0.0 | % | ||||||||||||
| Net income (loss) attributable to Quorum Health Corporation | $ | (98,968 | ) | (20.3 | )% | $ | (27,561 | ) | (5.2 | )% | ||||||||
| Earnings (loss) per share attributable to Quorum Health Corporation stockholders: | ||||||||||||||||||
| Basic and diluted (d) | $ | (3.48 | ) | $ | (0.99 | ) | ||||||||||||
| Weighted-average shares outstanding: | ||||||||||||||||||
| Basic and diluted | 28,454,336 | 27,800,597 | ||||||||||||||||
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For footnotes, see pages 8-10. |
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QUORUM HEALTH CORPORATION UNAUDITED CONSOLIDATED SELECTED OPERATING DATA |
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| Three Months Ended March 31, | ||||||||||||||
| 2018 | 2017 | Variance | % Variance | |||||||||||
| Consolidated: | ||||||||||||||
| Number of licensed beds at end of period (e) | 2,675 | 3,399 | (724 | ) | (21.3 | )% | ||||||||
| Admissions (f) | 20,549 | 23,656 | (3,107 | ) | (13.1 | )% | ||||||||
| Adjusted admissions (g) | 49,226 | 56,860 | (7,634 | ) | (13.4 | )% | ||||||||
| Total surgeries (h) | 20,587 | 25,948 | (5,361 | ) | (20.7 | )% | ||||||||
| Emergency room visits (i) | 153,797 | 172,939 | (19,142 | ) | (11.1 | )% | ||||||||
| Medicare case mix index (j) | 1.44 | 1.39 | 0.05 | 3.6 | % | |||||||||
| Same-facility: (k) | ||||||||||||||
| Number of licensed beds at end of period (e) | 2,675 | 2,675 | — | — | % | |||||||||
| Admissions (f) | 19,432 | 19,359 | 73 | 0.4 | % | |||||||||
| Adjusted admissions (g) | 46,354 | 45,871 | 483 | 1.1 | % | |||||||||
| Total surgeries (h) | 18,656 | 18,631 | 25 | 0.1 | % | |||||||||
| Emergency room visits (i) | 140,881 | 137,697 | 3,184 | 2.3 | % | |||||||||
| Medicare case mix index (j) | 1.43 | 1.39 | 0.04 | 2.9 | % | |||||||||
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For footnotes, see pages 8-10. |
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QUORUM HEALTH CORPORATION UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands, Except Par Value per Share and Shares) |
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| March 31, | December 31, | |||||||||
| 2018 | 2017 | |||||||||
| ASSETS | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 32,491 | $ | 5,617 | ||||||
| Patient accounts receivable, net of allowance for doubtful accounts of $352,509 at December 31, 2017 | 347,124 | 343,145 | ||||||||
| Inventories | 49,425 | 53,459 | ||||||||
| Prepaid expenses | 20,387 | 21,167 | ||||||||
| Due from third-party payors | 92,831 | 97,202 | ||||||||
| Current assets of hospitals held for sale | — | 8,112 | ||||||||
| Other current assets | 47,253 | 47,440 | ||||||||
| Total current assets | 589,511 | 576,142 | ||||||||
| Property and equipment, at cost | 1,362,086 | 1,405,184 | ||||||||
| Less: Accumulated depreciation and amortization | (755,474 | ) | (729,905 | ) | ||||||
| Total property and equipment, net | 606,612 | 675,279 | ||||||||
| Goodwill | 401,443 | 409,229 | ||||||||
| Intangible assets, net | 56,926 | 64,850 | ||||||||
| Long-term assets of hospitals held for sale | — | 7,734 | ||||||||
| Other long-term assets | 96,763 | 95,607 | ||||||||
| Total assets | $ | 1,751,255 | $ | 1,828,841 | ||||||
| LIABILITIES AND EQUITY | ||||||||||
| Current liabilities: | ||||||||||
| Current maturities of long-term debt | $ | 1,771 | $ | 1,855 | ||||||
| Accounts payable | 162,502 | 171,250 | ||||||||
| Accrued liabilities: | ||||||||||
| Accrued salaries and benefits | 83,865 | 77,803 | ||||||||
| Accrued interest | 22,051 | 10,466 | ||||||||
| Due to third-party payors | 44,551 | 47,705 | ||||||||
| Current liabilities of hospitals held for sale | — | 2,577 | ||||||||
| Other current liabilities | 44,024 | 43,687 | ||||||||
| Total current liabilities | 358,764 | 355,343 | ||||||||
| Long-term debt | 1,229,342 | 1,212,035 | ||||||||
| Deferred income tax liabilities, net | 8,310 | 7,774 | ||||||||
| Other long-term liabilities | 136,450 | 137,954 | ||||||||
| Total liabilities | 1,732,866 | 1,713,106 | ||||||||
| Redeemable noncontrolling interests | 2,316 | 2,325 | ||||||||
| Equity: | ||||||||||
| Quorum Health Corporation stockholders' equity: | ||||||||||
| Preferred stock, $0.0001 par value per share, 100,000,000 shares authorized, none issued | — | — | ||||||||
| Common stock, $0.0001 par value per share, 300,000,000 shares authorized; 31,162,491 shares issued and outstanding at March 31, 2018, and 30,294,895 shares issued and outstanding at December 31, 2017 | 3 | 3 | ||||||||
| Additional paid-in capital | 551,266 | 549,610 | ||||||||
| Accumulated other comprehensive income (loss) | (1,842 | ) | (1,956 | ) | ||||||
| Accumulated deficit | (547,184 | ) | (448,216 | ) | ||||||
| Total Quorum Health Corporation stockholders' equity | 2,243 | 99,441 | ||||||||
| Nonredeemable noncontrolling interests | 13,830 | 13,969 | ||||||||
| Total equity | 16,073 | 113,410 | ||||||||
| Total liabilities and equity | $ | 1,751,255 | $ | 1,828,841 | ||||||
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For footnotes, see pages 8-10. |
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QUORUM HEALTH CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) |
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| Three Months Ended March 31, | ||||||||||
| 2018 | 2017 | |||||||||
| Cash flows from operating activities: | ||||||||||
| Net income (loss) | $ | (98,487 | ) | $ | (27,205 | ) | ||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||
| Depreciation and amortization | 18,261 | 22,120 | ||||||||
| Non-cash interest expense, net | 1,811 | 730 | ||||||||
| Provision for (benefit from) deferred income taxes | 536 | 601 | ||||||||
| Stock-based compensation expense | 2,464 | 2,797 | ||||||||
| Impairment of long-lived assets and goodwill | 39,760 | 3,300 | ||||||||
| Loss (gain) on sale of hospitals, net | 7,815 | (870 | ) | |||||||
| Non-cash portion of loss on hospital closures | 5,305 | — | ||||||||
| Changes in reserves for self-insurance claims, net of payments | 6,025 | 4,212 | ||||||||
| Changes in reserves for legal, professional and settlement costs, net of payments | — | (3,651 | ) | |||||||
| Other non-cash expense (income), net | (49 | ) | (42 | ) | ||||||
| Changes in operating assets and liabilities, net of acquisitions and divestitures: | ||||||||||
| Patient accounts receivable, net | 1,429 | (17,163 | ) | |||||||
| Due from and due to third-party payors, net | 1,217 | 11,041 | ||||||||
| Inventories, prepaid expenses and other current assets | 1,290 | (16,674 | ) | |||||||
| Accounts payable and accrued liabilities | 9,587 | 38,065 | ||||||||
| Long-term assets and liabilities, net | 443 | 1,265 | ||||||||
| Net cash provided by (used in) operating activities | (2,593 | ) | 18,526 | |||||||
| Cash flows from investing activities: | ||||||||||
| Capital expenditures for property and equipment | (14,528 | ) | (23,217 | ) | ||||||
| Capital expenditures for software | (513 | ) | (1,506 | ) | ||||||
| Acquisitions, net of cash acquired | (32 | ) | — | |||||||
| Proceeds from the sale of hospitals | 38,663 | 4,282 | ||||||||
| Other investing activities, net | 197 | — | ||||||||
| Net cash provided by (used in) investing activities | 23,787 | (20,441 | ) | |||||||
| Cash flows from financing activities: | ||||||||||
| Borrowings under revolving credit facilities | 132,000 | 172,000 | ||||||||
| Repayments under revolving credit facilities | (114,000 | ) | (94,000 | ) | ||||||
| Borrowings of long-term debt | 12 | — | ||||||||
| Repayments of long-term debt | (627 | ) | (7,109 | ) | ||||||
| Payments of debt issuance costs | (2,268 | ) | (47 | ) | ||||||
| Cancellation of restricted stock awards for payroll tax withholdings on vested shares | (634 | ) | (1,028 | ) | ||||||
| Cash distributions to noncontrolling investors | (803 | ) | (3,814 | ) | ||||||
| Net cash provided by (used in) financing activities | 13,680 | 66,002 | ||||||||
| Net change in cash, cash equivalents and restricted cash | 34,874 | 64,087 | ||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 5,617 | 25,455 | ||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 40,491 | $ | 89,542 | ||||||
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For footnotes, see pages 8-10. |
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FOOTNOTES TO UNAUDITED FINANCIAL STATEMENTS AND SELECTED OPERATING DATA |
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| (a) | The California Department of Health Care Services administers the HQAF program, imposing a fee on certain general and acute care California hospitals. Revenues generated from these fees provide funding for the non-federal supplemental payments to California hospitals that serve California’s Medicaid (“Medi-Cal”) and uninsured patients. Under Phase V of the program, the Company recognized $7.9 million of net operating revenues less $2.1 million of provider taxes for the three months ended March 31, 2018 with no corresponding amounts in the three months ended March 31, 2017. The revenues and fees paid for the full year 2017 were recognized in the fourth quarter of 2017 when CMS approved the program. | |
| (b) | On January 1, 2018, the Company adopted ASC Topic 606 “Revenue from Contracts with Customers” using the modified retrospective method as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting under Topic 605. Prior to the adoption of ASC Topic 606, a significant portion of the Company’s allowance for doubtful accounts related to self-pay patients, as well as co-pays and deductibles owed to the Company by patients with insurance. Under ASC 606, the estimated allowance for these patients are generally considered a direct reduction to net operating revenues rather than as a provision for bad debts. | |
| (c) | EBITDA is a non-GAAP financial measure that consists of net income (loss) before interest, income taxes, depreciation and amortization. Adjusted EBITDA, also a non-GAAP financial measure, is EBITDA adjusted to add back the effect of certain legal, professional and settlement costs, impairment of long-lived assets and goodwill, net loss (gain) on sale of hospitals, net loss on closure of hospitals, transition of transition services agreements (“TSAs”), post-spin headcount reductions and executive severance. Transition of TSAs includes one-time transition costs, as well as duplicative costs as the Company exits certain of the TSAs. The Company uses Adjusted EBITDA as a measure of financial performance. Adjusted EBITDA is a key measure used by the Company’s management to assess the operating performance of its hospital operations business and to make decisions on the allocation of resources. Additionally, management utilizes Adjusted EBITDA in assessing the Company’s results of operations and in comparing the Company’s results of operations between periods. Adjusted EBITDA, Adjusted for Divestitures, also a non-GAAP financial measure, is further adjusted to exclude the effect of EBITDA of hospitals divested as of March 31, 2018. The Company has presented Adjusted EBITDA and Adjusted EBITDA, Adjusted for Divestitures in this press release because it believes these measures provide investors and other users of the Company’s financial statements with additional information about how the Company’s management assesses its results of operations. | |
| Adjusted EBITDA and Adjusted EBITDA, Adjusted for Divestitures are not measurements of financial performance under U.S. GAAP. These calculations should not be considered in isolation or as a substitute for net income, operating income or any other measure calculated in accordance with U.S. GAAP. The items excluded from Adjusted EBITDA and Adjusted EBITDA, Adjusted for Divestitures are significant components in understanding and evaluating the Company’s financial performance. The Company believes such adjustments are appropriate, as the magnitude and frequency of such items can vary significantly and are not related to the assessment of the Company’s normal operating performance. Additionally, the Company’s calculation of Adjusted EBITDA and Adjusted EBITDA, Adjusted for Divestitures may not be comparable to similarly titled measures reported by other companies. | ||
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FOOTNOTES TO UNAUDITED FINANCIAL STATEMENTS AND SELECTED OPERATING DATA |
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(Continued) |
| The following table reconciles Adjusted EBITDA and Adjusted EBITDA, Adjusted for Divestitures, each as defined above, to net income (loss), the most directly comparable U.S. GAAP financial measure, as derived directly from the Company’s consolidated statements of income for the respective periods (in thousands): |
| Three Months Ended March 31, | ||||||
| 2018 | 2017 | |||||
| Net income (loss) | $(98,487) | $(27,205) | ||||
| Interest expense, net | 30,931 | 27,530 | ||||
| Provision for (benefit from) income taxes | 366 | 701 | ||||
| Depreciation and amortization | 18,261 | 22,120 | ||||
| EBITDA | (48,929) | 23,146 | ||||
| Legal, professional and settlement costs | 3,413 | 535 | ||||
| Impairment of long-lived assets and goodwill | 39,760 | 3,300 | ||||
| Loss (gain) on sale of hospitals, net | 7,815 | (870) | ||||
| Loss on closure of hospitals, net | 13,746 | — | ||||
| Transition of transition service agreements | 717 | — | ||||
| Transaction costs related to the Spin-off | — | 31 | ||||
| Post-spin headcount reductions and executive severance | 1,898 | — | ||||
| Adjusted EBITDA | 18,420 | 26,142 | ||||
| Negative EBITDA of divested hospitals | 8,377 | 4,769 | ||||
| Adjusted EBITDA, Adjusted for Divestitures | $26,797 | $30,911 | ||||
| (d) | The following table reconciles net income (loss) attributable to Quorum Health Corporation, as reported and on a per share basis, with the adjustments described herein: | ||||
| Three Months Ended March 31, | ||||||||||
| 2018 | 2017 | |||||||||
| (per share - basic and diluted) | ||||||||||
| Earnings (loss) per share attributable to Quorum Health Corporation stockholders, as reported | $ | (3.48 | ) | $ | (0.99 | ) | ||||
| Adjustments: | ||||||||||
| Legal, professional and settlement costs | 0.12 | 0.02 | ||||||||
| Impairment of long-lived assets and goodwill | 1.40 | 0.12 | ||||||||
| Loss (gain) on sale of hospitals, net | 0.28 | (0.03 | ) | |||||||
| Loss on closure of hospitals, net | 0.48 | — | ||||||||
| Transition of transition service agreements | 0.03 | — | ||||||||
| Transaction costs related to the Spin-off | — | — | ||||||||
| Post-spin headcount reductions and executive severance | 0.07 | — | ||||||||
| Net operating losses of divested hospitals | 0.30 | 0.18 | ||||||||
| Earnings (loss) per share attributable to Quorum Health Corporation stockholders, excluding adjustments | $ | (0.80 | ) | $ | (0.70 | ) | ||||
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FOOTNOTES TO UNAUDITED FINANCIAL STATEMENTS AND SELECTED OPERATING DATA |
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(Continued) |
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| (e) | Licensed beds are the number of beds for which the appropriate state agency licenses a hospital, regardless of whether the beds are actually available for patient use. | |
| (f) | Admissions represent the number of patients admitted for inpatient services. | |
| (g) | Adjusted admissions are computed by multiplying admissions by gross patient revenues and then dividing that number by gross inpatient revenues. | |
| (h) | Total surgeries represent the number of inpatient and outpatient surgeries. | |
| (i) | Emergency room visits represent the number of patients registered and treated in the Company’s emergency rooms. | |
| (j) | Medicare case mix index is a relative value assigned to a diagnosis-related group of patients that is used in determining the allocation of resources necessary to treat the patients in that group. Medicare case mix index is calculated as the average case mix index for all Medicare admissions during the period. | |
| (k) | Same-facility financial and operating data excludes hospitals that were sold prior to and as of the end of the current reporting period. Same-facility operating results have been adjusted to exclude the operating results of Sandhills Regional Medical Center, Barrow Regional Medical Center, Cherokee Medical Center, Trinity Hospital of Augusta, Lock Haven Hospital, Sunbury Community Hospital, L.V. Stabler Memorial Hospital, Affinity Medical Center, Vista Medical Center West and Clearview Regional Medical Center which were sold or closed on December 1, 2016, December 31, 2016, March 31, 2017, June 30, 2017, September 30, 2017, September 30, 2017, October 31, 2017, February 11, 2018, March 1, 2018 and March 31, 2018, respectively. | |
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995 that involve risk and uncertainties. All statements in this press release other than statements of historical fact, including statements regarding projections, expected operating results, and other events that depend upon or refer to future events or conditions or that include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” “thinks,” and similar expressions, are forward-looking statements. Although the Company believes that these forward-looking statements are based on reasonable assumptions, these assumptions are inherently subject to significant economic and competitive uncertainties and contingencies, which are difficult or impossible to predict accurately and may be beyond the control of the Company. Accordingly, the Company cannot give any assurance that its expectations will in fact occur and cautions that actual results may differ materially from those in the forward-looking statements. A number of factors could affect the future results of the Company or the healthcare industry generally and could cause the Company’s expected results to differ materially from those expressed in this press release.
These factors include, but are not limited to, the following:
- general economic and business conditions, both nationally and in the regions in which the Company operates;
- risks associated with the Company’s substantial indebtedness, leverage and debt service obligations, including its ability to comply with its debt covenants, including its senior credit facility, as amended;
- the Company’s ability to successfully make acquisitions or complete divestitures and the timing thereof, its ability to complete any such acquisitions or divestitures on desired terms or at all, and its ability to realize the intended benefits from any such acquisitions or divestitures;
- changes in reimbursement methodologies and rates paid by federal or state healthcare programs, including Medicare and Medicaid, or commercial payors, and the timeliness of reimbursement payments, including delays in certain states in which the Company operates;
- the extent to which regulatory and economic changes occur in Illinois, where a material portion of the Company’s revenues are concentrated;
- demographic changes;
- the impact of changes made to the Affordable Care Act, the potential for repeal or additional changes to the Affordable Care Act, its implementation or its interpretation, as well as changes in other federal, state or local laws or regulations affecting the healthcare industry;
- increases in the amount and risk of collectability of patient accounts receivable, including lower collectability levels which may result from, among other things, self-pay growth and difficulties in collecting payments for which patients are responsible, including co-pays and deductibles;
- competition;
- changes in medical or other technology;
- any potential impairments in the carrying values of long-lived assets and goodwill or the shortening of the useful lives of long-lived assets;
- the costs associated with terminating the transition services agreements with Community Health Systems, Inc., including the related arbitration proceeding, as well as the additional costs and risks associated with any operational problems, delays in collections from payors, and errors and control issues during the termination and transition process;
- the impact of certain outsourcing functions, and the ability of CHS, as provider of the Company’s billing and collection services pursuant to the transition services agreements, to timely and appropriately bill and collect;
- the Company’s ability to manage effectively its arrangements with third-party vendors for key non-clinical business functions and services;
- the ability to achieve operating and financial targets and to control the costs of providing services if patient volumes are lower than expected;
- the effects related to outbreaks of infectious diseases;
- the Company’s ability to attract and retain, at reasonable employment costs, qualified personnel, key management, physicians, nurses and other healthcare workers;
- increases in wages as a result of inflation or competition for highly technical positions and rising medical supply and drug costs due to market pressure from pharmaceutical companies and new product releases;
- the impact of seasonal or severe weather conditions or earthquakes;
- the Company’s ongoing ability to demonstrate meaningful use of certified EHR technology, including meeting interoperability objectives, and avoid related penalties and recognize income for the related Medicare or Medicaid incentive payments, to the extent such payments have not expired;
- the efforts of healthcare insurers, providers, large employer groups and others to contain healthcare costs, including the trend toward treatment of patients in less acute or specialty healthcare settings and the increased emphasis on value-based purchasing;
- the failure to comply with governmental regulations;
- the Company’s ability, where appropriate, to enter into, maintain and comply with provider arrangements with payors and the terms of these arrangements, which may be impacted by the increasing consolidation of health insurers and managed care companies and vertical integration efforts involving payors and healthcare providers;
- the potential adverse impact of known and unknown government investigations, internal investigations, audits, and federal and state false claims act litigation and other legal proceedings, including the shareholder and creditor litigations against the Company and certain of its officers and threats of litigation, as well as the significant costs and attention from management required to address such matters;
- liabilities and other claims asserted against the Company, including self-insured malpractice claims;
- the impact of cyber-attacks or security breaches, including, but not limited to, the compromise of the Company’s facilities and confidential patient data, potential harm to patients, remediation and other expenses, potential liability under HIPAA and consumer protection laws, federal and state governmental inquiries, and damage to the Company’s reputation;
- the Company’s ability to utilize its income tax loss carryforwards and risks associated with the Tax Cuts and Jobs Act of 2017;
- the Company’s ability to maintain certain accreditations at its existing facilities and any future facilities it may acquire;
- the success and long-term viability of healthcare insurance exchanges and potential changes to the beneficiary enrollment process;
- the extent to which states support or implement changes to Medicaid programs, utilize healthcare insurance exchanges or alter the provision of healthcare to state residents through regulation or otherwise;
- the timing and amount of cash flows related to the California HQAF Program, as well as the potential for retroactive adjustments for prior year payments;
- the effects related to the continued implementation of the sequestration spending reductions and the potential for future deficit reduction legislation;
- changes in U.S. generally accepted accounting principles, including the impacts of adopting newly issued accounting standards;
- the availability and terms of capital to fund acquisitions, replacement facilities or other capital expenditures;
- the Company’s ability to obtain adequate levels of professional and general liability and workers’ compensation liability insurance; and
- the other risk factors set forth in the Company’s other public filings with the Securities and Exchange Commission.
Although the Company believes that these forward-looking statements are based on reasonable assumptions, these assumptions are inherently subject to significant regulatory, economic and competitive uncertainties and contingencies, which are difficult or impossible to predict accurately and may be beyond its control. Accordingly, the Company cannot give any assurance that its expectations will in fact occur and cautions that actual results may differ materially from those in the forward-looking statements. Given these uncertainties, prospective investors are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements are made as of the date of this filing. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.